LV Thạc sỹ_Repositioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

RESEARCH DISSERTATION
“REPOSITIONING STRATEGY
FOR LG’ FLAT PANEL DISPLAY
TO RECOVER NO.1
MARKETSHARE IN VIETNAM”

Author: Nguyen Xuan Truong
Program: MBA
15th Intake: 2006 - 2008
Tutor: Doan Hoang Minh, Ph.D
Adviser: Nguyen Xuan Chau
Hanoi, October 2009

Subject: Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

INTRODUCTION
1. Rationales of the research:
In recent years, consumer electronics market has been keeping on fast growing, especially, the
rapid increasing of high-tech products such as flat plane display (OLED TV, LCD TV, Plasma
TV). With the effects from WTO joining and AFTA, price of most categories becomes more and
more competitive, it results by increasing of audiovisual demand during the time.
Flat panel display (FPD) market demand has been booming up since 2007 and has a compound
average growth rate (CAGR) to be 129% in 2007-2009 period and continuously over 30% in
2009-2012 period. This category not only has a fast growth, but also it brings a big potential
profitability to manufacturers.
LG Electronics Vietnam (LGEVN) had been No.1 position for flat panel display products in the
period 2001~2006. Since the aggressive marketing re-enforcement from Samsung and Sony,
LG’s losing No.1 position and be backwarded from these competitors in the market.

The question is that although LG’s FPD products line-up is quite good about quality, design,
function and the price is competitive, but currently LG’ FPD products are No.3 in terms of
market share by 15%, going after Samsung (32%) and Sony (20%).
Therefore, I want to find the solutions for these problems and try to design a new re-positioning
strategy through:

2


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
Recommendation

Analysis
Environment
Analyses
(Biz environment, industry,
market demand…)

Competitor
Analysis
(4P Analysis)

Product Strategy
Segmentation

Price Strategy

Targeting to some
segmented market

Place Strategy

Re-positioning
market

Promotion Strategy

Customer Analysis

People Strategy

(Behavior, shopping trend,
customer segment)

Because of these reasons, I choose the dissertation: “Re-positioning strategy for LG’s Flat Panel
Display to recover No.1 market share in Vietnam”
2. Research objectives:
The objectives of the research are:
- To understand the current situation of consumer electronics market
- To deeply explore the market insight through analyzing competitors and customers
- To specify the strengths, weaknesses, opportunities, and threats of LG brand in consumer
electronics market in general and flat panel display in particular.
- To identify the reasons leading to backward of LG’s FPD in the market.
- To re-design marketing strategy based on analyzing bottlenecks and challenges in the process
of marketing strategy implementation.
- By working arts in LGEVN’s marketing department (2004-2009) and applying the knowledge
learnt from CFVG, I will make some recommendations for re-positioning strategy for LG’s FPD.
3. Research methodology:
In order to make research, I use the below methods:
- Colleting the data:

+ Primary data:


Direct interview the customers and observe consumer’s behavior

3


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam


Direct interview the dealers, retailers in the consumer electronics business

+ Secondary data:


The data from customer research from AC Nielsen and market insight from Gfk



The data from LG about sales performance, channel structure analysis…



Refer the information from many resources: magazines, internet…

- Analyzing the data by the method:
+ Method of comparison
+ Method of statistics analysis
4. Research Scope:

Due to the limitation of time and knowledge, I only focus to research the dissertation by
understanding the current situation of FPD business through direct interviewing data done from
August to September 2009 and data of LG electronics Vietnam in 2007-2009
5. Research structure:
Introduction
Chapter 1: Theoretical background of competitive positioning
Chapter 2: The current situation of Flat Panel Display business
Chapter 3: Re-positioning strategy to recover No.1 market share for LG’s Flat Panel Display in
Vietnam
Chapter 4: Difficulties and challenges, and recommendation in the process of implementation
Conclusion

4


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

5


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

TABLE OF CONTENTS
INTRODUCTION

Page

1. Rationales of the research--------------------------------------------------------------------------07
2. Research objective----------------------------------------------------------------------------------08
3. Research method------------------------------------------------------------------------------------08

4. Research scope---------------------------------------------------------------------------------------09
5. Research structure-----------------------------------------------------------------------------------09
CHAPTER I: THEORETICAL BACKGROUND OF COMPETITIVE POSITIONING
1.1 Product positioning---------------------------------------------------------------------------------12
1.2 Brand positioning------------------------------------------------------------------------------------13
1.3 Channel positioning---------------------------------------------------------------------------------15
1.4 Pricing positioning----------------------------------------------------------------------------------18
CHAPTER II: THE CURRENT SITUATION OF FLAT PANEL DISPLAY BUSINESS
2.1 Introduction of LG Electronics Vietnam Company----------------------------------------20
2.1.1 Overview of LG Electronics Vietnam company---------------------------------------------20
2.1.2 Overview of LG’s flat panel display business in the recent years.------------------------21
2.2. Business environment analysis-----------------------------------------------------------------22
2.2.1. Economic and industrial environment--------------------------------------------------------22
2.2.2. Market analysis-----------------------------------------------------------------------------------25
2.3. Competition analysis-----------------------------------------------------------------------------28
2.3.1

Product-------------------------------------------------------------------------------------------28

2.3.2

Price-----------------------------------------------------------------------------------------------30

2.3.3

Place (Channel)---------------------------------------------------------------------------------31

2.3.4

Promotion----------------------------------------------------------------------------------------32

2.4. Customer analysis---------------------------------------------------------------------------------33
2.4.1

Key buying factor-------------------------------------------------------------------------------33

2.4.2

Communication tools--------------------------------------------------------------------------34

2.4.3

Lifestyle------------------------------------------------------------------------------------------34
6


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
2.5. Company Analysis--------------------------------------------------------------------------------36
CHAPPTER III: RE-POSITIONING STRATEGY TO RECOVER NO.1 MARKET
SHARE FOR LG’s FLAT PANEL DISPLAY IN VIETNAM
3.1. Vision of LG Electronics Vietnam in Flat Panel Display market---------------------- 39
3.1.1

Marketing objectives---------------------------------------------------------------------------39

3.1.2

Sales Objectives---------------------------------------------------------------------------------39

3.2. Segmentation, Targeting and Positioning----------------------------------------------------39

3.2.1

Customer segmentation------------------------------------------------------------------------39

3.2.2

Target to segmented market-------------------------------------------------------------------40

3.2.3

Positioning to targeted market----------------------------------------------------------------41

3.3. Strategy Re-positioning--------------------------------------------------------------------------42
3.3.1

Product Strategy--------------------------------------------------------------------------------42

3.3.2

Price Strategy -----------------------------------------------------------------------------------43

3.3.3

Channel Strategy -------------------------------------------------------------------------------46

3.3.4

Promotion Strategy ----------------------------------------------------------------------------48

3.3.5

People Strategy ---------------------------------------------------------------------------------50

CHAPTER IV: DIFFICULTIES/CHALLENGES & RECOMMENDATION----------54
4.1. Difficulties and challenges in the process of implementation---------------------------54
4.2 Recommendation-----------------------------------------------------------------------------------55
CONCLUSION-----------------------------------------------------------------------------------------56

7


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

LIST OF ABBREVIATIONS
LGEVN

:

LG Electronics Vietnam

HE

:

Home Entertainment (FPD, LCD TV, PDP TV, CRT, AV)

HA

:

Home Appliance (RAC, REF, WM, MWO, VC)

FPD

:

Flat Panel Display

LCD TV

:

Liquid Crystal Display

PDP TV

:

Plasma Display Panel

CRT TV

:

Cathode-ray Tube

AV

:

Audio Video

MNT

:

Monitor

RAC

:

Room Air Conditioner

REF

:

Refrigerator

WM

:

Washing Machine

MWO

:

Microware Oven

VC

:

Vacuum Cleaner

KPI

:

Key Performance Index

AR

:

Account Receivable

KAM

:

Key Account Management

MOT

:

Moment of Truth

PRM

:

Product Roadmap

SCM

:

Supply Chain Management

PSI

:

Purchase, Sales, Inventory

KBF

:

Key Buying Factor

8


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

ACKNOWLEDGMENTS

First of all, I would like to express my special thanks to my tutor – Ph.D Doan Hoang Minh – for
all the guidance and support that he has given me through the course of this dissertation. His
suggestions regarding the framework and review of the thesis have been greatly appreciated and
acknowledged. I truly appreciate his efforts in spending valuable time reading and correcting the
numerous drafts of this thesis.
I would also like to thank my college – Mr. Nguyen Xuan Chau – marketing manager of LG
Electronics Vietnam. His effort in spending valuable time supplying the related data and
suggestions despite his heavy workload is highly appreciated.

9


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

CHAPTER I:
THEORETICAL BACKGROUND
Generally, in marketing, positioning means the process by which marketers try to create an
image or identity in the minds of their target market for its product, brand, or organization. Its
objective is to occupy a clear, unique, and advantageous position in the consumer’s mind.
Furthermore, Re-positioning involves changing the identity of a product, relative to the identity
of competing products, in the collective minds of the target market.
Question: What sets your product, service and company apart from your competitors? What
value do you provide and how is it different from the others?
Competitive positioning is about defining how you will “differentiate” your value in the market.
It is about carving out a spot in the competitive landscape and focusing to deliver value with that
strategy. A good strategy analysis includes
 Market profile: size, competitors, stage of growth

 Customer segments: groups of prospects with similar wants & needs (characteristics)
 Competitive analysis: strengths, weaknesses, opportunities and threats in the landscape
 Positioning strategy: how you’ll position your offering to catch opportunities in the
market
 Value proposition: the type of value you’ll deliver to the market
When your offering is clearly different from that of your competitors, it is easy to build new
prospects and attract customers to purchase. Without differentiation, it will take more time and
cost more persuade customers to choose you; as a result, you often end up with competing by
price – a tough situation to sustain over the long term.
Your competitive positioning strategy is the foundation for your business’s future – it is the first
thing you should do if you are going to launch a new company or product. It is also important
when you are expanding or looking for a new edge.

10


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
Profile your market


Finding the sizes of your market and major competitors, how their positions are.



Determine whether your current stage is introductory or growth or mature or declining in
the market. This “lifecycle stage” affects your holistic marketing strategy.

Segment your market


Understand the problems that your business is facing in the market. Talk with prospects
and customers, or conduct research if you have the time, budget and opportunity.
Uncover their true wants and needs – you will learn a great deal about what you can
deliver to solve their problems and beat your competitors.



Group your prospects into “segments” that have similar problems and can use your
product in similar ways. By grouping them into segments, you can efficiently market to
each group.

Evaluate your competition


List your competitors. Include any competitor that can solve your customers’ problems,
even if their solutions are much different from yours – they are still your competitors.



Rate your own company and your direct competitors on operational efficiency (price),
product leadership and customer intimacy. It is easy to think you are the best, so be as
impartial as you can.

Stake a position


Identify areas where your competition is vulnerable.



Determine whether you can focus on those vulnerable areas - they are major
opportunities.



Identify products/services you can offer to meet the true needs of your market in a new
and better way.

Define your value proposition

11


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam


There are three core types of value that a company can deliver: operational efficiency (the
lowest cost), product leadership (the best product), or customer intimacy (the best
solution & service). Determine which one you are best equipped to deliver; your decision
is your “value proposition.”

Product positioning
Question: What is your product? Which factor of product such as design, technology, function,
etc, is offering to customer?
Product positioning is what the customer percept about your product’s value, features, and
benefits; it is a comparison to the other available alternatives offered by the competition. These
beliefs tend to based on customer experiences and evidence, rather than awareness created by
advertising or promotion.
Marketers manage product positioning by focusing their marketing activities on a positioning
strategy. Pricing, promotion, channels of distribution, and advertising all are to gear up the

chosen positioning strategy.
Generally, there are six basic strategies for product positioning:


By attribute or benefit - This is the most frequently used positioning strategy. For a light
beer, it might be that it tastes great or that it is less filling. For toothpaste, it might be the
mint taste or tartar control.



By use or application - The users of Apple computers can design and use graphics more
easily than with Windows or UNIX. Apple positions its computers based on how the
computer is used.



By user - Facebook is a social networking site used exclusively by college students.
Facebook is too cool for MySpace and serves a smaller, more sophisticated cohort. Only
college students may participate with their campus e-mail IDs.



By product or service class - Margarine competes as an alternative to butter. Margarine is
positioned as a lower cost and healthier alternative to butter, while butter provides better
taste and wholesome ingredients.

12


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam



By competitor - BMW and Mercedes often compare themselves to each other segmenting
the market to just the crème de la crème of the automobile market. Ford and Chevy need
not apply.



By price or quality - Tiffany and Costco both sell diamonds. Tiffany wants us to believe
that their diamonds are of the highest quality, while Costco tells us that diamonds are
diamonds and that only a chump will pay Tiffany prices.

Positioning is what the customer believes and not what the provider wants them to believe.
Positioning can change due the counter measures taken at the competition. Managing your
product positioning requires that you know your customer and that you understand your
competition; this is the job of market research not just what the entrepreneur thinks is true.
Make product positioning strategy decisions


Decide on new revenue growth and profits.



Decide on new product development.



Decide on price.



Decide on sales force, distribution, service.



Decide on customer psychological factors, not features and benefits.



Decide on product promotion.

1.1. Brand positioning strategy
Question: What is a brand? Is it a logo? A name or slogan? A graphic design or color scheme?
Your brand is the entire experience your prospects and customers have with your company.
It is what you stand for, a promise you make, and the personality you convey?. While it includes
your logo, color palette and slogan, those are only creative elements that convey your brand.
Instead, your brand lives in every day-to-day interaction you have with your market:


The images you convey



The messages you deliver on your website, proposals and sales materials



The way your employees interact with customers

13

Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam


A customer’s opinion of you versus your competition

Branding is crucial for products and services sold in huge consumer markets. It is also important
in B2B because it helps you stand out from your competition. It brings your competitive position
and value proposition to life; it positions you as a certain “something” in the mind of your
prospects and customers. Your brand consistently and repeatedly tells your prospects and
customers why they should buy from you.
Think about successful consumer brands like Disney, Tiffany or Starbucks. You probably know
what each brand represents. Now imagine that you are competing against one of these
companies. If you want to capture significant market share, start with a strong and unique brand
identity or you may not get far.
In your industry, there may or may not be a strong brand. However, when you put two companies
up against each other, the one that represents something valuable will have an easier time
reaching, engaging, closing and retaining customers. A strong brand strategy can be a big
advantage.
Successful branding also creates “brand equity” – the amount of money that customers are
willing to pay just because it is your brand. In addition to generating revenue, brand equity
makes your company itself more valuable over the long term.
Develop your brand strategy around emotional benefits


List the features and benefits of your product / service. A feature is an attribute – a color,
a configuration; a benefit is what that feature does for the customer.



Determine which benefits are most important to each of your customer segments.



Identify which benefits are emotional – the most powerful brand strategies tap into
emotions, even among business buyers.



Look at the emotional benefits and boil them down to one thing that your customers
should think of when they think of you. That is what your brand should represent.

Define your brand


Think of your brand as a person with a distinct personality. Describe him or her, and then
convey these traits in everything you do and create.
14


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam


Write positioning statements and a story about your brand; use them throughout your
company materials.



Choose colors, fonts and other visual elements that match your personality.



Determine how your employees will interact with prospects and customers to convey the
personality and make sure your brand “lives” within your company.

1.2. Channel positioning strategy
Question: How do you sell to your end-users? Do you use a direct sales team? Resellers? A
catalog or website?
Distribution channels are the pathways that companies use to sell their products to endusers. Companies can sell through a single channel or through multiple channels such as:


Direct/sales team: One or more sales teams that you employ directly. You may use
multiple teams that specialize in different products or customer segments.



Direct/internet: Selling through your own e-commerce website.



Wholesaler/distributor: A company that buys products in bulk from many manufacturers
and then re-sells smaller volumes to resellers or retailers.



Value-added reseller (VAR): A VAR works with end-users to provide custom solutions
that may include multiple products and services from different manufacturers.



Consultant: A consultant develops relationships with companies and provides either
specific or very broad services; they may recommend a manufacturer’s product or simply
purchase it to deliver a solution for the customer.



Dealer: A company or person, who buys inventory from either a manufacturer or
distributor, then re-sells to an end-user.



Retail: Retailers sell directly to end-users via a physical store, website or catalog.



Sales agent: You can outsource your sales function to a company that sells different
manufacturers’ products to a group of similar customers in a specific territory.

15


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
Distribution is one of the classic “4 Ps” of marketing (product, promotion, price, placement a.k.a.
distribution). It is a key element in your entire marketing strategy — it helps you expand your
reach and grow revenue.
To create a good distribution program, focus on the needs of your end-users.


If they need personalized service, you can utilize a local dealer network or reseller

program to provide that service.



If your users prefer to buy online, you can create an e-commerce website and fulfillment
system and sell direct; you can also sell to another online retailer or a distributor to offer
your product on their own sites.



You can build your own specialized sales team to prospect and close deals directly with
customers.

Wholesalers, resellers, retailers, consultants and agents already have resources and relationships
to bring quickly your product to market. If you sell through these groups instead of (or in
addition to) selling direct, treat the entire channel as a group of customers – and they are, since
they are buying your product and re-selling it. Understand their needs and deliver strong
marketing programs; you will maximize everyone’s revenue in the process.
You can evaluate a new distribution channel or improve your channel marketing at any time. It is
especially important to think about distribution when you are going after a new customer
segment, releasing a new product, or looking for ways to grow aggressively your business.
Evaluate how your end-users need to buy
Your distribution strategy should deliver the information and service your prospects need. For
each customer segment, consider


How and where they prefer to buy



Whether they need personalized education and training



Whether they need additional products or services to be used alongside yours



Whether your product needs to be customized or installed



Whether your product needs to be serviced

16


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
Match end-user needs to a distribution strategy


If your end-users need a great deal of information and service, your company can deliver
it directly through a sales force. You can also build a channel of qualified resellers. The
size of the market and your price will probably dictate which scenario is best.



If the buying process is fair straight forward, you can sell direct via a website/catalog or
perhaps through a wholesale/retail structure. You may also use an inbound telemarketing
group or a field sales team.



If you need complete control over your product’s delivery and service, adding a channel
probably is not right for you.

Identify natural partners
If you want to grow beyond the direct model, look for companies that have relationships with
your end-users. If consultants, wholesalers or retailers already reach your customer base, they are
natural partners.
Build your channel
If you are setting up a distribution channel with one or more partners, treat it as a sales process:


Approach the potential channel partner and “sell” the value of the partnership



Establish goals, service requirements and reporting requirements



Deliver inventory (if necessary) and sales/support materials



Train the partner



Run promotions and programs to support the partner and help them increase sales

Minimize pricing conflicts
If you use multiple channels, carefully map out the price for each step in your channel and
include a fair profit for each type of partner. Then compare the price that the end-user will pay; if
a customer can buy from one channel at a lower price than another, your partners will rightfully
have concerns. Pricing conflict is common but it can jeopardize your entire strategy, so do your
best to map out the price at each step and develop the best solution possible.

17


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
Drive revenue through the channel
Service your channel partners as you would service your best customers and work with them to
drive revenue. For example, provide them with marketing funds or materials to promote your
products; run campaigns to generate leads and forward them to your partners
1.3. Pricing positioning strategy
Price is one of the classic “4 Ps” of marketing (product, price, place, promotion). Yet in many
B2B companies, marketers are not necessarily involved in pricing strategy.
Pricing is a complex subject – there are many factors to consider, both short- and long-term. For
example, your prices need to


Reflect the value you provide versus your competitors



Consider what the market will truly pay for your offering



Enable you to reach your revenue and market share goals



Maximize your profits

When you offer a truly unique product or service with little direct competition, it can be
challenging to establish your price. Put together a strong strategy and competitive analysis so
you can see:


What your prospects might pay for other solutions to their problems



Where your price should fall in relation to theirs

When your price, value proposition and competitive position are aligned, you are in the best
situation to maximize revenue and profits. For example, here are three scenarios that show the
relationship between these elements.
It is best to create your brand strategy and identify your distribution channels before you develop
your pricing strategy. By doing so, you will ensure that your pricing reflects your value
proposition and reinforces your brand; you can also minimize pricing conflicts with your channel
partners.
Match your pricing strategy to your value proposition

18

Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
Your price sends a strong message to your market – it needs to be consistent with the value you
are delivering.


If your value proposition is operational efficiency, then your price needs to be extremely
competitive.



If your value proposition is product leadership or customer intimacy, a low price sends
the wrong message. After all, if a luxury item is not expensive, is it really a luxury?

Understand your cost structure and profitability goals
Companies calculate these costs differently, so verify the exact calculations your company uses
for:


Cost of goods sold (COGS): the cost to physically produce a product or service



Gross profit: the difference between the revenue you earn on a product and the cost to
physically produce it

In addition, understand how much profit the company needs to generate. You will be far more
effective when considering discount promotions – you will know exactly how low you can go
and still be profitable.
Analyze your competitors’ prices

Look at a wide variety of direct and indirect competitors to gauge where your price falls. If your
value proposition is operational efficiency, evaluate your competitors on a regular basis to ensure
that you are continually competitive.
Determine price sensitivity
A higher price typically means lower volume. Yet you may generate more total revenue and/or
profit with fewer units at the higher price; it depends on how sensitive your customers are to
price fluctuations. If they are extremely sensitive, you may be better off at a much lower price
with substantially greater volume.
Estimate how sensitive your customers are to fluctuations – it will help you determine the right
price and volume combination. More importantly, you can estimate how a price change can
affect your revenue.

19


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

CHAPTER II:
THE CURRENT SITUATION OF FLAT PANEL DISPLAY
BUSINESS
2.1 Introduction of LG Electronics Vietnam
2.1.1 Overview of LG Electronics Vietnam Company
LG Electronics, Inc is a global leader and technology innovator in consumer electronics, home
appliances and mobile communications. Established in 1958, LG is the first–ever electronics
company in Korea. Through many phase of unceasing development, thanks to great and non-stop
efforts, LG Electronics has become a global company with more than 75 000 employees working
in 77 subsidiaries around the world. LG Electronics is pursuing the vision of becoming a true
global digital leader, attracting customers worldwide, through its innovative and design. The
company’s goal is to rank among the top 03 consumer electronics and telecommunications
companies in the world by 2010. To achieve this, LG embraces the idea of “Great Company,

Great People”, recognizing that only great people can create great company.
LG Electronics Vietnam, found in 1995, has one factory in Hung Yen province, which specialize
in assembling brown goods such as TV, DVD player, monitor, optical storage device, mobile
phone with capacity is 550 000 sets per year for all and other factory is located in Hai Phong
City which specialize in assembling white goods such as air conditioner, refrigerator, washing
machine, microwave oven, vacuum cleaner.
So far, LG Electronics Vietnam is considered as the pioneer producer as well as among market
leaders in Vietnam with leading product including flat TV, DVD player, monitor and air
conditioner…
In 2009, LG Electronics Vietnam set turnover target with 250 million dollars and set compound
annual growth rate (CAGR) at 30%. It wants to consolidate the current No.2 position in Vietnam
market and hope to be No.1 position in near future. Beside the traditional products such as Flat
TV, air conditioners, washing machine, and refrigerators, LG Electronics Vietnam focuses on
fast-growing products such as mobile phone and flat panel display

20


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
2.1.2 Situation of LG’s flat panel display business in the recent years
Since 2000, flat panel display products appeared in Vietnam market with Japanese brands such as
Sony, Pioneer, and JVC. The price was around 8 000~10 000 US dollar for 42 inches, that was
the reason why demand of LCD TV and plasma TV was still small and they were considered as
luxury and premium products at home.
Knowing that flat panel display demand would increase in the future and these products were
used to enhance brand image, LGEVN launched flat panel display products since 2001. With the
advantage of competitive price, LG’s flat panel display products occupied market share from
other competitors and to be number one position in this market from the period 2002~2006.
However, the tough competition happened since market demand increased due to sharp price
down trend and the aggressive marketing activities from Samsung in 2006 and Sony in 2007.

That was actual difficult period for LG Electronics Vietnam due to limited marketing budget, unflexible policies, non-innovated products…That were the reason why LG lost the number one
and number two market share in 2006 and 2008, comparatively. Now it also got the challenges
from other competitors such as Panasonic and Toshiba.

Chart 01: LCD TV market share in period 2004~2008 (1)
To realize the current situation, in the recent years, LG has been trying to innovate product
design and technology, to reduce costs to make price competitive, to re-structure channels, and to
focus more on marketing activities.
(1) Source: Gfk data , December 2008

21


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
2.2 Business Environment Analysis
2.2.1 Economic and industrial environment
•

Macro economic factors.

In the present economic background, Vietnam is considered a success country. The economic
growth rate is putted at 6.5%; inflation has reduced sharply in the year-end months; the budget
deficit and trade deficit have decreased against the estimation and social welfare has been
improved. The political and social situation continues to be stable. The Government’s solution to
stabilize the macro economy has obtained important results; particularly the monetary policy has
made a positive contribution to reducing inflation and trade deficit. However, the economic
situation started to have more difficulties from the fourth quarter of 2008. A strong decrease of
export in November results in increasing trade deficit.
The strongest impact due to the financial crisis is on Vietnam’s export, which has occupied 65%
of its GDP. Foreign Direct Investment (FDI) has made not so strong impact because of the

country’s large domestic saving of GDP’s 30%. In other words, FDI has contributed only one
fourth of the economic growth. It is forecasted by World Bank that Vietnam’s growth rate is put
at 6.5% in 2009. However, if the Government can quickly deploy its domestic stimulus package,
its economic growth rate could be able to reach 6% and higher in 2010. Inflation in 2009 will be
about 10% and increase a little bit in 2010. Trade deficit is estimated at GDP’s 17%; the overall
balance of payment deficit could be higher than 2008. Therefore, the actual pressure on
increasing the foreign exchange rate is stronger. Bad debt rate is estimated not over 5%. The
stock market could continue to be sluggish in early months of 2009 and recover slowly in the
remaining months of the year. The real estate market could emerge from its rock bottom in the
last months of 2009.
In the end of October, the Government has just extended the first stimulus package up to the first
quarter 2010 and launched the second stimulus package. With this action, Vietnam would attempt
to attain a higher economic growth next year while still curbing high inflation risks, ensuring
social and political stability and improving people’s lives.
•

Industrial Environment

22


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
With the affecting of joining WTO, price of most categories became more competitive, thus
pushing consuming industry demand during the time. In the consumer electronics industry,
telecom and information technology has been increasing fast and cover nearly a half, in the
meantime, home appliances and consumer electronics showed stable and still cover the
remaining half of consuming industry.

Chat 02: Market Portion of CE Industry (Jan ~ Sep 2009) (2)
Currently, TV still covers the main market of consumer electronics products with LCD TV and

CRT TV. In 2009, consumer electronics retail market witnessed transitioning time and showed
rapid increase of flat panel display products (40.2% up to 59,5%) and the sharp decrease of
traditional CRT TV (47% down to 26.2%).
Look at the chart A below, we can see that CRT TV now in matured period and now has a
downtrend. Although the price was down, market demand still decreased sharply. However, LCD
TV and Plasma TV show the diverse trend. Market demand has increased remarkably due to
sharp price down in recent years.
(2) Source: Gfk Market Insight Report, September 2009

23


Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

Chart 03: Consumer Electronics Market Growth (Sep ’08 to Sep ’09) (3)
The chart below shows value share of 11 regions included: Central Highlands, Danang, Hanoi,
HCM City, Mekong River Delta, North East South, North Central Coast, North East, North West,
Red River Delta, and South Central Coast. In general, the order of regions is similar to last year;
HCMC and Hanoi are two largest cities, which heavily contributed more than 40% in value share
of total CE market. Beside, the regions, which are currently evaluated as potential markets, are
North East South, Mekong River Delta and North.C.Coast. Those regions are considered as
having good economic growths while other regions with different geographical features also
have potential purchased market.
North West
2%

Red.R.D
8%

North East

9%
North.C.C
6%

South.C.C
6%

C.Highland
4%
Danang
5%
Hanoi
16%

N.E.South
7%
Mekong.R.D
9%

HCM
28%

Chart 04: Consumer Electronics Market Pie by Region (1H.09) (4)

(3) Source: Gfk Market Insight Report, September 2009
(4) Source: Gfk data, June 2009

24

Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam
For the development trend of television broadcast, Vietnam television broadcast still depends on
analog TV. However, Vietnam has been investing and deploying digital TV in the recent years.
The digital TV such as cable TV, DTH, satellite is growing fast in cities such as Hanoi and
Hochiminh city and now expanding to other cities and rural areas. In the 2010~2012 period,
Vietnam will try to end analogue TV in big cities, retransmit DTH to remote areas, and develop
low cost for set-top box project. Vietnam continues to expand digital TV to nationwide in the
2012~2015 period and plan to stop analog TV in 2015.
With the trend of television broadcasting development, the technology for digital TV also shows
another trend, that is resolution technology. Before the year 2002, the SD resolution (852 x 480
pixels) was popular for flat panel display but it moved to HD resolution (1,366 x 758 pixels) in
2002~2008. Now, Full HD resolution (1,920 x 1,080 pixels) is actually new trend.

Chart 05: Roadmap of Digital TV implementation in Vietnam (5)
2.2.2 Market Analysis
•

Yearly Market Demand

Actually, market demand of FPD has been booming up since 2007. Market price of these
products down fast, which was partly due to AFTA Route and touch competition from main
players such as Samsung, LG, Sony in the market. The figure in Chart 6 shows that market
demand increase over 900% from 2006 to 2008 and continues increasing in 2009 with the

(5) Source: Radio and Mobile Development Strategy in Vietnam, Sept 2007

25